The Total Economic Impact™ Of Microsoft Azure IaaS

• Evidence and data.

  Interviewees said that moving to the cloud using Azure IaaS presented opportunities for infrastructure modernization and cost savings. Not only did interviewees realize more cost efficiencies, but the new IaaS infrastructure was more modern, higher performing, and included more services and capabilities. Interviewees shared a range of ways in which they could optimize infrastructure and realize cost savings on various components, including storage, networking, and compute resources. Interviewees also experienced cost savings from avoiding data center refreshes (e.g., upgrades to power density, cooling, installation of new cabling, hardware such as storage or servers). In some cases, interviewees saw cost reductions related to reduced real estate costs (e.g., rents) or from cooling costs for data center buildings. Costs savings vary depending on the environment, but could include the following:

  • Interviewees noted retiring on-premises servers, at times as many as 70% or more.
  • Interviewees’ organizations avoided data center refreshes that would have involved significant capex costs and described budgetary benefits from being able to shift to opex.
  • Interviewees saw reduced storage costs. A CIO in the public sector shared: “The cost per terabyte could reach up to $450 on-premises. Now, with moving to Azure, that cost really became one-third.”
  • Interviewees saved on networking as well. A senior manager of technology at a construction company said, “We went from spending $2 million to spending $700,000 on networking” since adopting Azure IaaS.
  • Interviewees described significant savings on infrastructure since implementing Azure IaaS. A senior manager of technology at a construction company said, “[In terms of] actual budget dollars, we’re roughly looking at $5 million in savings [since we adopted Azure IaaS].”
  • A CIO in the public sector detailed the cost savings enabled by Azure IaaS: “[In Year 1, we] were able to save around 20% by moving into the Azure IaaS. And that transpired into a million-dollar savings just on the infrastructure side.”

• Modeling and assumptions.

  For the composite organization, Forrester assumes the following:

  • Infrastructure costs at the composite are $5.2 million in Year 1, growing 10% each year to support corporate expansion.
  • Each year existing workloads are migrated to Azure IaaS and new IaaS offerings launch.
  • The number of workloads migrated increases in Years 2 and 3, decreasing costs as more legacy infrastructure is deprecated and more resources optimized.

• Risks

  Benefits realized may vary based on the following factors:

  • Workload needs and IaaS offerings selected.
  • Existing infrastructure costs and the extent legacy or on-premises infrastructure must be maintained going forward.

• Results

  To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $6.8 million.

AVOIDED LEGACY INFRASTRUCTURE MANAGEMENT FTE COSTS

• Evidence and data.

  Interviewees noted that their organizations’ traditional on-premises data centers required significant IT labor effort to manage. Before Azure IaaS, their IT teams had to manage the provision and maintenance of all aspects of infrastructure including hardware and software. Azure IaaS removed the need to self-manage infrastructure. The interviewees’ staff repurposed time toward higher-value tasks.

  • According to interviewees, IT staff could discontinue a range of infrastructure management tasks, including server management, administration, adding random-access memory (RAM), and upgrading hardware among others, saving significant time.
  • A senior manager of technology at a construction company said, “The amount of time that my team has to manage and do the legacy work on server management, server administration, adding RAM, upgrading hardware on a continual basis — that just doesn’t exist anymore.”
  • A CIO in the public sector described: “We have really freed up many of our developers’ time. … The heavy lifting administration has been taken care of by this migration”.
  • Interviewees’ organizations responded to these time savings in a variety of ways, typically repurposing staff to new tasks within the IT organization. This work was characterized as “more attractive” and “more strategic.”
  • According to a senior manager of technology at a construction company: “When [IT staff] don’t have to do administration work, it frees them up to do what I would consider more attractive work. It keeps them more engaged because the work is challenging. It’s just not your typical server administration.”
  • As more workloads are migrated to Azure IaaS, the interviewees noted their companies gradually repurposed tens or even hundreds of employees, depending on the size of the interviewee’s organization.

• Modeling and assumptions.

  For the composite organization, Forrester assumes the following:

  • The composite organization continues running hybrid workloads.
  • In Year 1, 15 FTEs are repurposed with initial workload migrations. Scaling at the composite results in headcount growth in Years 2 and 3.
  • Despite headcount growth, the amount of legacy infrastructure management effort avoided increases year-over-year as staff becomes more efficient and additional workloads are migrated.

• Risks.

  Benefits realized may vary based on the following factors:

  • The number of staff supporting legacy infrastructure.
  • Compensation of staff supporting legacy infrastructure.
  • The number and nature of workloads migrated. Some workloads, such as hybrid, may require ongoing maintenance of on-premises infrastructure.

• Results.

  To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $2.8 million.

AVOIDED LOST REVENUE FROM IMPROVED RELIABILITY

• Evidence and data.

  According to interviewees, moving to Azure IaaS from their organizations’ legacy on-premises infrastructures ensured reliability for critical workloads. With a backup in the cloud, interviewees’ companies reduced outages and quickly restored operations when they did occur. Depending on the interviewee whose organization was involved, the amount of downtime avoided could be anywhere from hours to days or weeks.

  • A senior manager of technology at a construction company estimated, “[We’ve] reduced time [to restore] by 75%.”
  • A senior director of IT architecture at a financial services company stated: “We lose between $1 million to $2 million from every minute that we are down. We used to face one or two outages every year. The big difference is that before, it used to take us around 2 to 4 hours to do a full [recovery time objective] (RTO). Now, it’s 15 to 30 minutes.”

• Modeling and assumptions.

  For the composite organization, Forrester assumes the following:

  • Lost revenue is valued at $100,000 per minute of downtime.
  • A 10% operating margin.

• Risks.

  Benefits realized may vary based on the following factors:

  • How much downtime was experienced prior to adopting Azure IaaS.
  • The cost implications of downtime for the organization or workload.
  • Redundancy in configuration.
  • The operating margin applicable according to industry.

• Results.

  To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV of $1.9 million.

INCOME FROM NEW AZURE IAAS OFFERINGS

• Evidence and data.

  Features from Azure IaaS, including scale, performance, availability, and reliability, made it possible for the interviewees’ organizations to launch new offerings, generating new streams of revenue. In several instances, interviewees noted that Azure-native tools and the access to data they provided could be monetized:

  • A CIO at a manufacturing and retail company detailed how Azure IaaS helped their company gain a better understanding of the market and respond to customer sentiment in a way that impacted its business: “[We’ve gained a] better understanding of the market through some of the data lakes that we’ve been building and [Azure-native] tools, including several [in the] AI area. … We have been able to get a much better view of how customers think about us, why they think we’re good, why we’re not good, where we could improve and really get a lot of customer sentiment data. I’d like to believe that that has led to better service, better business.”
  • In addition, the interviewee at the manufacturing and retail organization shared that they had rebuilt a B2B sales platform on Azure IaaS with significant quality upgrades, generating more sales. The same organization introduced new product-as-a-service offering replacement parts on a subscription basis and opened a new line of business selling road condition datasets to smart cities.
  • The senior director of IT architecture noted that their financial services organization started a new initiative that provided lending services generating close to $1 billion in revenue.
  • This interviewee also noted the ability to configure the infrastructure as needed and deploy quickly was important to their organization’s ability to generate new offerings and new revenue: “For handling that specific infrastructure for doing new lending capabilities, I used to have a generic infrastructure. But if there is a new external connectivity that is going to be required, it takes weeks for me to roll out that new functionality. Now, I can roll it out in hours. That means the business can start doing their job and it’s securing that process.”

• Modeling and assumptions.

  For the composite organization, Forrester assumes the following:

  • Benefits take at least six months to realize, lowering the revenue realized in Year 1.
  • Not all additional income is attributable to Azure IaaS alone, so an attribution of 75% is applied to account for the need to develop and realize business ideas capable of generating income.

• Risks.

  Benefits realized may vary based on the following factors:

  • The value of new offerings made possible through Azure IaaS.
  • Operating margin applicable according to industry.
  • How quickly value can be realized.

• Results.

  To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV of $5.2 million.

UNQUANTIFIED BENEFITS

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:

• Increased innovation and reduced technical debt.

  Azure IaaS makes it possible for the interviewees’ organizations to reduce technical debt. Interviewees’ companies could easily, quickly, and cost-effectively test out new services or deploy new features, even those that require high-performing infrastructure. According to a senior manager of technology at a construction company: “It’s game changing. It just allows you to deliver to the business faster and more efficient services. You can try things before you deploy, and that just gives the business a lot more input in what you are providing to them for a service.”

  A senior director of IT architecture at a financial services company saw these features as a “huge improvement” and noted: “[Developers] can have their environments built out faster without waiting and they can test out different types of sizes based on performance that they want to go in and achieve that. Before I used to do it through virtualization servers but, as I mentioned, it took me weeks sometimes to fine-tune. Now, it’s taking minutes for me to provision them.”

  Developers at interviewees’ organizations could self-provision assets and applications and modules could be tested and completed more effectively and get to market faster. Azure IaaS opened new possibilities to make parallel testing possible, increasing efficiency and effectiveness of releases and deployments.

  A CIO in the public sector noted: “Our development cycle is much more effective than before. We have better development test environments on an ad hoc basis. We are so agile now, so we can have multiple projects running at the same time and that all transpires into less people. We can quickly set up and turn off the new server environment, for example.”

• Improved security.

  Multiple interviewees mentioned improved security as an objective of their investment in Azure IaaS. Adopting Azure IaaS was key to improving cybersecurity posture in the face of increasing cyberattacks. A VP of IT operations at an IT company noted: “[Azure IaaS] is very beneficial for the network perspective since it has been achieving Zero Trust and microsegmentation if possible. [It’s been beneficial for users] being able to use our services anywhere, anytime.”

• Better compliance for global operations.

  Azure IaaS supports key security strategies and compliance with regulations across geographies. Interviewees whose companies are in regulated industries could entrust sensitive workloads to Azure IaaS. With Azure data centers in nearly all regions, Azure IaaS was well suited to global operations. A senior manager of technology at a construction company said: “It’s mostly the user experience, just because with the latency — with Azure IaaS — they don’t need to come all the way back to headquarters for our on-premises services, so they’re closer to the resources depending on the Azure region that they’re in.”

• Improved employee experience.

  Azure IaaS helped the interviewees’ organizations deliver a high-quality employee experience, including:

  • Better support of remote work. Interviewees found that Azure IaaS features, such as the ability to spin up virtual workloads and the ability to configure remote desktops, went a long way in supporting remote work as a key part of enhanced employee experience during the COVID-19 pandemic and beyond. According to a senior manager of technology at a construction company: “If there is a big workload, we can click a button and spin up more resources. During the pandemic, that was a really big factor, because our workforce was working remote, and we were able to just spin up more resources to be able to handle that.”
  • More interesting work. With Azure IaaS, IT staff at the interviewees’ organizations spent less time patching and maintaining legacy infrastructure, and more time on new, more interesting tasks in the Azure IaaS environment.

• Improved sustainability.

  Azure IaaS was an important part of sustainability strategies, rendering operations more efficient and less carbon-intensive than legacy on-premises data centers. A CIO at a manufacturer said: “We compared the CO2 accounting from our existing data center versus comparable compute on Azure. And now, since recently, we have gotten a lot better in the FinOps space and we feel that we’re also making progress on running a cloud much more efficiently than a traditional data center.”

FLEXIBILITY

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Azure IaaS and later realize additional uses and business opportunities, including:

• New technologies and functionalities.

  Azure IaaS has a wide and constantly growing range of options and functionalities. The service model means that companies can try new things and deploy without an expensive investment that cannot easily be recouped. A CIO in the public sector described the ways in which their organization could quickly and economically try out or deploy new IaaS functionalities: “If [we] want like any service, app service, like Hadoop or HPC or whatever it is, we can quickly set it up and pilot it basically. If we don’t have that capability, we would need a data center or somewhat of a build out basically where we are putting servers and all that capability.”

• Optimized infrastructure for usage and cost.

  Azure IaaS easily scales up or down, and offers clear visibility into usage, which puts customers in good stead to understand their usage and optimize accordingly.

• Multicloud and edge.

  Azure IaaS is a suitable part of a strategy involving multiple clouds and minimizing vendor lock-in for cloud services. Companies can flexibly move workloads if the need arises. A senior architect at a financial services company said: “We are using Azure as part of my multicloud strategy. I don’t want to create vendor lock-in for my hyperscalers or my cloud providers as a whole.”

• A CIO at a public sector organization detailed use of IaaS in edge environments: “We are doing quite a bit of AI-based, real-time monitoring and collecting a lot of data, use cases for edge computing for monitoring, surveillance, and how to analyze that data better. We are using quite a bit of those data integration tools as well as data analysis tools and creating a lot of dashboards and monitoring capabilities, not only for that purpose, but also for application and infrastructure monitoring as well.”

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).